Commentary and Tracking of a Portfolio of Stocks using approach from "The Little Book that Beats the Market" by Joel Greenblatt aka Magic Formula Investing

Sunday, February 26, 2017

Monthly Magic Formula Investing Tracking Portfolio 1/29/16

MFI Tracking Portfolio

Another month/year has flown by. And so it is time to look at another monthly tracking portfolio as we reach the end of January 2017. As my faithful readers know, I have been tracking the Magic Formula Stocks as described by Joel Greenblatt in The Little Book That Beats the Stock Market since January 2006. Every month I take the top 50 stocks over $100m market cap from his website and track how that portfolio of stocks fares versus the Russell 3000 for the next 12 months. It has been an uphill struggle as the tracking portfolios have under-performed, driven in part by Chinese reverse merger fiascos, for-profit education stocks and home health care stocks all being proverbial albatrosses.

Onward

Fearless readers will recall we had a 29 month "losing streak".. Then we had a 13 month winning streak. This month, MFI (wait for it) won by 2.4 percentage points, our third straight win. Amazingly, this is the biggest win since the June 28th 2013 portfolio. It has been a dry spell. 18 of the 19 had recently lost, but concurrent with the Trump rally, MFI stocks saw a resurgence these past 3+ months. But the tising tide seems to be receding. Only 6 of 11 open portfolios are leading. In aggregate we are now slightly losing again, giving up our 4 point lead from a month ago. It is disappointing and I have certainly felt some of that pain in my personal account. Here are the 50 stocks in descending performance order:

Stock

Initial
Price

End
Price

Percent Change

52 week
low

Mkt Cap

AGX

31.46

69.90

122.2%

30.62

475

MKSI

32.47

66.70

105.4%

32.72

1,751

BLBD

8.71

16.70

91.7%

8.65

183

BBSI

34.57

62.30

80.2%

22.55

252

WNC

11.74

20.85

77.7%

10.74

777

IDCC

49.46

86.05

74.0%

49.53

1,777

HPQ

10.25

17.65

72.3%

10.60

18,482

OUTR

30.49

52.00

70.5%

24.81

524

CPLA

44.55

75.80

70.2%

45.62

541

STRA

44.68

75.95

70.0%

43.50

493

MCFT

9.63

14.94

55.1%

10.25

239

STRZA

23.85

35.50

48.8%

20.33

2,417

FFIV

97.12

144.41

48.7%

93.64

6,677

BBY

31.03

45.56

46.8%

28.76

10,546

AAPL

94.90

136.66

44.0%

89.47

537,316

TIME

13.00

18.30

40.7%

12.50

1,453

LEA

100.73

141.36

40.3%

97.35

7,579

TIVO

8.29

11.34

36.8%

15.06

811

IQNT

16.88

22.90

35.6%

14.56

584

MSGN

16.55

22.30

34.7%

14.73

1,238

CSCO

25.50

34.32

34.6%

25.81

133,423

DLX

56.39

75.51

33.9%

57.00

2,814

NSR

24.87

33.25

33.7%

21.10

1,327

TSRA

28.46

37.95

33.4%

28.57

1,473

PETS

16.04

21.33

33.0%

16.47

339

VC

71.63

94.16

31.5%

63.04

2,844

SRDX

19.46

25.05

28.7%

17.45

253

VIAB

35.12

43.89

25.0%

33.94

14,351

RHI

38.75

47.96

23.8%

34.34

5,191

RECN

13.76

17.00

23.6%

12.30

525

VEC

19.21

23.37

21.7%

12.50

203

FLR

46.05

55.09

19.6%

44.05

6,507

UTHR

123.80

146.71

18.5%

97.52

5,927

RPXC

9.84

10.99

11.7%

8.60

555

KFY

27.81

30.77

10.7%

18.57

1,449

WILN

1.76

1.83

3.8%

1.27

218

USNA

58.16

58.95

1.4%

54.25

1,499

ENTA

28.40

27.72

-2.4%

20.79

534

BPT

22.66

21.30

-6.0%

11.29

541

VDSI

14.46

13.55

-6.3%

12.80

572

GME

28.98

26.28

-9.3%

20.10

3,204

SCMP

13.21

11.75

-11.1%

9.59

599

NHTC

31.90

27.39

-14.1%

20.59

406

PBI

17.21

14.07

-18.2%

12.41

3,554

GILD

86.11

69.94

-18.8%

65.38

125,278

CALM

51.98

37.95

-27.0%

35.65

2,543

BKE

29.50

20.20

-31.5%

19.45

1,540

KORS

56.58

37.30

-34.1%

34.92

10,341

NLNK

21.63

14.18

-34.4%

9.23

705

FIT

12.15

6.15

-49.4%

5.62

2,517

Definitely a few trends here. The For Profit Education space finally ended its death spiral. CPLA and STRA were decent. Auto parts stocks did well: WNC, LEA and VC. Quite a few buyouts, IQNT, OUTR, NSR and TIVO. I have mentioned that a "Dogs of MFI" approach has shown some promise. KORS BKE and PBI are still on the list. It would take some courage to buy any of those - but I guess that is why they are called dogs.

Here is a listing of every portfolio I have tracked:

Date

MFI

R3K

Lead

1/6/2006

16.0%

10.9%

1

2/17/2006

21.2%

14.6%

1

3/29/2006

13.0%

9.6%

1

4/7/2006

10.3%

12.1%

0

5/12/2006

20.4%

18.6%

1

5/31/2006

29.2%

23.3%

1

6/30/2006

22.4%

20.0%

1

7/31/2006

19.7%

17.3%

1

8/31/2006

13.0%

13.3%

0

9/28/2006

12.7%

14.6%

0

10/27/2006

10.3%

12.0%

0

11/29/2006

-0.3%

4.8%

0

12/28/2006

-6.9%

3.4%

0

1/26/2007

-10.2%

-6.6%

0

2/27/2007

-3.7%

-1.0%

0

3/26/2007

-9.8%

-5.5%

0

4/27/2007

-10.9%

-5.0%

0

5/29/2007

-11.5%

-6.3%

0

7/3/2007

-30.0%

-15.6%

0

7/30/2007

-19.9%

-11.5%

0

8/30/2007

-12.5%

-8.7%

0

9/27/2007

-19.0%

-18.2%

0

11/2/2007

-40.4%

-34.3%

0

11/28/2007

-40.1%

-38.3%

0

12/28/2007

-36.3%

-40.0%

1

1/25/2008

-36.4%

-35.9%

0

2/26/2008

-51.7%

-41.5%

0

3/24/2008

-40.9%

-36.8%

0

4/25/2008

-25.6%

-31.0%

1

5/28/2008

-22.2%

-33.6%

1

7/2/2008

-11.7%

-25.3%

1

7/29/2008

-10.5%

-20.9%

1

8/29/2008

-13.8%

-17.9%

1

9/26/2008

-4.3%

-10.0%

1

10/31/2008

18.7%

13.9%

1

11/26/2008

50.9%

27.7%

1

12/26/2008

48.9%

32.3%

1

1/23/2009

59.3%

36.4%

1

2/27/2009

92.8%

55.6%

1

3/27/2009

85.8%

48.1%

1

4/24/2009

69.7%

45.8%

1

5/29/2009

31.8%

22.8%

1

6/29/2009

21.3%

24.0%

0

7/29/2009

19.5%

15.9%

1

8/28/2009

7.4%

8.8%

0

9/25/2009

12.6%

12.4%

1

10/30/2009

22.7%

18.3%

1

11/27/2009

24.3%

13.6%

1

12/31/2009

23.7%

18.1%

1

1/22/2010

19.0%

20.6%

0

2/26/2010

18.6%

23.6%

0

3/25/2010

10.0%

15.4%

0

4/23/2010

7.1%

11.4%

0

5/28/2010

19.3%

25.4%

0

6/29/2010

16.7%

25.7%

0

7/29/2010

5.4%

20.1%

0

9/2/2010

7.3%

10.1%

0

9/24/2010

-4.3%

0.3%

0

10/29/2010

-2.9%

10.4%

0

11/26/2010

-8.5%

1.4%

0

1/3/2011

-11.4%

0.1%

0

1/28/2011

-7.6%

4.9%

0

2/25/2011

-5.5%

5.0%

0

3/24/2011

-4.4%

7.4%

0

4/21/2011

-16.0%

3.2%

0

5/27/2011

-12.0%

-0.4%

0

6/24/2011

-9.5%

5.0%

0

7/29/2011

-4.3%

8.1%

0

8/26/2011

12.0%

21.6%

0

9/30/2011

23.5%

29.6%

0

10/28/2011

0.4%

11.5%

0

11/25/2011

13.9%

24.0%

0

12/29/2011

9.9%

15.9%

0

1/27/2012

7.4%

16.6%

0

2/24/2012

7.8%

13.3%

0

3/23/2012

9.1%

15.2%

0

4/27/2012

10.5%

15.3%

0

5/25/2012

26.5%

27.5%

0

6/22/2012

26.1%

24.6%

1

7/27/2012

30.4%

25.7%

1

8/24/2012

26.0%

19.8%

1

9/28/2012

39.3%

22.1%

1

10/26/2012

48.3%

28.9%

1

11/23/2012

45.7%

32.1%

1

12/31/2012

52.3%

33.0%

1

1/25/2013

39.5%

22.0%

1

2/22/2013

46.5%

26.4%

1

3/28/2013

40.1%

21.2%

1

4/26/2013

35.0%

20.5%

1

5/24/2013

20.4%

19.2%

1

6/28/2013

26.9%

24.1%

1

7/29/2013

17.8%

19.0%

0

8/30/2013

17.5%

24.6%

0

9/27/2013

12.9%

17.7%

0

10/25/2013

11.8%

15.4%

0

11/29/2013

12.3%

15.6%

0

12/31/2013

12.7%

11.9%

1

1/31/2014

14.2%

13.0%

1

2/28/2014

15.4%

13.9%

1

3/28/2014

6.1%

12.3%

0

4/25/2014

8.6%

15.8%

0

5/30/2014

5.9%

11.7%

0

6/27/2014

2.5%

9.2%

0

7/25/2014

3.3%

8.7%

0

8/29/2014

-2.2%

1.0%

0

9/26/2014

-0.6%

-0.9%

1

10/31/2014

4.3%

4.4%

0

11/28/2014

-2.9%

2.9%

0

12/31/2014

-9.3%

0.3%

0

1/30/2015

-12.4%

-2.8%

0

2/27/2015

-19.0%

-7.3%

0

3/27/2015

-17.1%

-1.9%

0

4/24/2015

-15.4%

-0.8%

0

5/29/2015

-14.1%

0.1%

0

6/26/2015

-8.7%

0.4%

0

7/30/2015

3.96%

4.02%

0

8/28/2015

5.6%

10.2%

0

9/25/2015

6.5%

13.8%

0

10/30/2015

2.0%

4.0%

0

11/27/2015

8.9%

8.4%

1

12/31/2015

13.7%

12.6%

1

1/29/2016

23.1%

22.4%

1

2/26/2016

28.5%

25.4%

1

3/24/2016

26.1%

19.7%

1

4/22/2016

13.0%

15.8%

0

5/27/2016

16.7%

15.3%

1

6/30/2016

16.6%

15.0%

1

7/29/2016

11.1%

10.6%

1

8/26/2016

11.6%

10.6%

1

9/30/2016

11.3%

10.2%

1

10/28/2016

12.3%

12.7%

0

11/25/2016

2.7%

7.1%

0

12/30/2016

1.9%

5.7%

0

1/27/2017

1.4%

3.2%

0

SubsetsI also have tracked 3 subsets of the larger portfolios: (1) dividend stocks (those with a yield per Yahoo of at least 2.6%), (2) new stocks (those new to the tracking portfolios in past 12 months and Dogs. It is like the dogs of the Dow in that you take the worst five performing stocks from the prior year that renew or all those that dropped more that 29%. The dividend portfolio was solid, up about 24.6%. The Dogs portfolio was bad, up just 6.5%. The New approach very good, up 48.6%.

Stock

End Price

Percent Change

FFIV

144.41

49%

LEA

141.36

40%

MKSI

66.70

105%

RECN

17.00

24%

RHI

47.96

24%

SRDX

25.05

29%

TIME

18.30

41%

WNC

20.85

78%

Finally, I like to track cash as it is more "honest" than percentages as if you go up by 25% and then down by 25%, that is a different result than up by 5% then down by 5%. So I track what you would have today if you had spread $100,000 over the first twelve portfolios evenly. I think it is obvious why my formula approach is a function of dividend subset.

Category

Value

Total

200,072

Total Russell 3K

229,563

New

168,466

Dogs

244,576

Dividend

438,205

Ok, that is a wrap. Hope you find it useful. Off to set up a new portfolio.